Correlation Between Forum Energy and Lotus Resources
Can any of the company-specific risk be diversified away by investing in both Forum Energy and Lotus Resources at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Forum Energy and Lotus Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forum Energy Metals and Lotus Resources Limited, you can compare the effects of market volatilities on Forum Energy and Lotus Resources and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Forum Energy with a short position of Lotus Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Lotus Resources.
Diversification Opportunities for Forum Energy and Lotus Resources
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Forum and Lotus is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Metals and Lotus Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Resources and Forum Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Forum Energy Metals are associated (or correlated) with Lotus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Resources has no effect on the direction of Forum Energy i.e., Forum Energy and Lotus Resources go up and down completely randomly.
Pair Corralation between Forum Energy and Lotus Resources
Assuming the 90 days horizon Forum Energy Metals is expected to generate 1.87 times more return on investment than Lotus Resources. However, Forum Energy is 1.87 times more volatile than Lotus Resources Limited. It trades about -0.02 of its potential returns per unit of risk. Lotus Resources Limited is currently generating about -0.07 per unit of risk. If you would invest 8.00 in Forum Energy Metals on August 29, 2024 and sell it today you would lose (1.25) from holding Forum Energy Metals or give up 15.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forum Energy Metals vs. Lotus Resources Limited
Performance |
| Timeline |
| Forum Energy Metals |
| Lotus Resources |
Forum Energy and Lotus Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forum Energy and Lotus Resources
The main advantage of trading using opposite Forum Energy and Lotus Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forum Energy position performs unexpectedly, Lotus Resources can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lotus Resources will offset losses from the drop in Lotus Resources' long position.| Forum Energy vs. Petroleo Brasileiro Petrobras | Forum Energy vs. Equinor ASA ADR | Forum Energy vs. Eni SpA ADR | Forum Energy vs. YPF Sociedad Anonima |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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